Buy-Down Mortgage
Understand buy-down mortgages in Canadian real estate — how they work, their benefits, and when they’re used.
July 27, 2025
What is a Buy-Down Mortgage?
A buy-down mortgage is a loan where the interest rate is temporarily or permanently reduced through upfront payments made by the borrower or a third party.
Why Buy-Down Mortgages Matter in Real Estate
In Canadian real estate financing, buy-downs can make homeownership more affordable in the early years or help sellers/investors incentivize purchases.
Types:
- Temporary (e.g., 3-2-1 buy-down)
- Permanent (lower rate for full term)
Understanding buy-down mortgages helps buyers assess cost-benefit and long-term affordability.
Example of a Buy-Down Mortgage in Action
The builder offered a buy-down mortgage incentive, covering points to lower the buyer’s interest rate for the first three years.
Key Takeaways
- Interest rate lowered via upfront payment
- May be temporary or permanent
- Used to improve affordability
- Often funded by builders or sellers
- Requires cost-benefit analysis
Related Terms
- Fixed Rate Mortgage
- Adjustable-Rate Mortgage (ARM)
- Mortgage Broker
- Refinance
- Mortgage Term
The Agency’s Mauricio Umansky (left) and Rennie’s Greg Zayadi (right).
An overview of the 23 properties. (Chartwell Retirement Residences)
10355 King Boulevard in Surrey. (Arcadis, Wesgroup Properties)
Renderings from the NE and SE corners of Civic District. (Arcadis, Wesgroup Properties)
Renderings from the SW and NW corners of Civic District. (Arcadis, Wesgroup Properties)
